********************************************************
NOTICE
********************************************************
This document was converted from
WordPerfect to ASCII Text format.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
WordPerfect version or Adobe Acrobat version, if available.
*****************************************************************
IN REPLY REFER TO:
DA 97-433
February 26, 1997
Leonard J. Kennedy, Esq.
Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Dear Mr. Kennedy:
This letter is in response to your letter dated January 31, 1997, a copy of which is
attached, in which you seek clarification of the Commission's policy on the resale of commercial
mobile radio services (CMRS). Specifically, you ask whether a recent Wireless
Telecommunications Bureau (Bureau) enforcement decision, Metro Communications, Inc. v.
Ameritech Mobile Communications, Inc., altered the Commission's existing policy prohibiting
exclusive resale contracts between facilities-based CMRS carriers and resellers. In your letter,
you state that at least one major facilities-based CMRS carrier has interpreted the last sentence of
paragraph 26 of Metro Communications to provide it with flexibility to discriminate among
resellers on rates, terms, and conditions of service solely on the basis of whether resellers agree
to become the carrier's exclusive reseller. Because of the competitive importance of the
Commission's resale policy and our desire to eliminate any confusion that may have resulted
from the Bureau's Metro Communications Order, I believe that it would be helpful to respond to
your request.
As an initial matter, I note that a number of issues related to the Commission's CMRS
resale policy currently are pending before the Commission on reconsideration. To the
extent that this letter characterizes the Commission's CMRS resale rule, the discussion is limited
to the rule as currently written and interpreted in administrative and judicialdecisions. Nothing in this letter should be interpreted as reaching a decision on any issue
pending on reconsideration.
As you state in your letter, the Commission currently prohibits cellular, broadband
personal communications services (PCS), and certain specialized mobile radio ("covered SMR")
providers from restricting resale of their services, except that this prohibition "sunsets," or ceases
to be effective, five years after the last group of initial licensees for broadband PCS spectrum in
the 1850-1910 and 1930-1990 MHz bands are awarded. As the Commission has stated,
prohibiting unreasonable restrictions on resale confers important public benefits in markets that
are less than fully competitive. Among the resale restrictions that the Commission has
determined run afoul of the rule are provisions requiring a reseller to serve as the facilities-based
carrier's exclusive agent.
While the Commission has acknowledged that the resale rule may not be appropriate for
all markets at all times, it has not modified the rule since its applicability was extended to
broadband PCS and covered SMR licensees in the First Report and Order. Nothing in the
subsequent enforcement decision, Metro Communications, alters the CMRS resale rule.
The Metro Communications case involved an exclusive agency agreement between a
facilities-based cellular carrier and an agent. In paragraph 26, the Bureau distinguished the facts
of the case from those of TRAC Communications, which dealt with the Commission's resale
policy but did not involve an agency relationship between the parties. TRAC Communications,
which was decided by the Commission in 1990, involved three entities: a facilities-based
cellular carrier (Ameritech); an entity that resold Ameritech's cellular service for a limited time
before its own system became operational (DCTC); and a non-facilities-based provider (TRAC)
that resold the service of DCTC. The agreement between TRAC and DCTC contained an
exclusivity provision which prevented TRAC from reselling the service of others, including
Ameritech. TRAC filed with the Commission a formal complaint against DCTC, alleging that
the provision violated the Commission's cellular resale policies. The Commission found that,
during the period before DCTC's system became operational, there was no anticompetitive effect
shown with respect to the exclusivity provision because TRAC could have dealt directly with
Ameritech rather than through DCTC, which itself was a reseller of Ameritech's service during
that period. In contrast, such an exclusivity provision was considered anticompetitive during
the period in which DCTC was selling service to TRAC over its own licensed cellular facilities.
Thus, as the Bureau noted in Metro Communications, TRAC Communications indicated that
exclusive distribution arrangements between a reseller and another reseller did not violate the
resale rule; however, such arrangements violated the rule if they were between a facilities-based
provider and a reseller.
The facilities-based cellular carrier described in your letter appears to have misinterpreted
this reference to TRAC Communications in the Metro Communications case. Presumably, there
is no "intermediary reseller" involved in the situation described in your letter that would liken the
case to TRAC Communications. The only reason the Commission permitted resale restrictions in
TRAC Communications was because, during the period in which the reseller was selling the
services of another reseller, it had the "option" of dealing with the facilities-based provider itself.
Since this is not the factual scenario described in your letter, we do not believe the TRAC
Communications case is applicable here. Moreover, we note that this part of the holding of
TRAC Communications would not be sound reasoning under the Commission's amended resale
rule, which prohibits restricted resale by "providers" of cellular, broadband PCS, and covered
SMR services. Under the current rule, all three entities involved in TRAC Communicationswould be bound by the rule since they were all providers of CMRS. For these reasons, the
Bureau would reject the contention that the language in Metro Communications at issue here
supports a new interpretation of the Commission's resale rule.
As a result, the Bureau clarifies that nothing in Metro Communications suggests that
CMRS carriers subject to the resale rule may use exclusivity as a basis to "reasonably
discriminate" among resellers with respect to rates, terms or other conditions of service.
Commission policies and precedent continue to support the view that exclusivity provisions in
CMRS resale agreements are impermissible restrictions on CMRS resale in violation of Section
20.12 of the Commission's Rules.
Sincerely,
Michele C. Farquhar
Chief, Wireless Telecommunications Bureau
Enclosure